What Temasek Holdings Looks Out For In Companies?

Temasek Holdings has been around for more than 40 years and has built up a net portfolio of around $275 billion. So far, it has managed to return a compounded annual return of 15% over 40 years, which is a solid achievement for any investment company. Even though recent returns over the last 10 years have dipped slightly, Temasek managed to rebound strongly last year and returned around 13% to shareholders. On its website, the investment firm underlines four investing principals that govern its investment decisions. In this article, I dive into what these entail and how we, as individual…

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Temasek Holdings has been around for more than 40 years and has built up a net portfolio of around $275 billion. So far, it has managed to return a compounded annual return of 15% over 40 years, which is a solid achievement for any investment company.

Even though recent returns over the last 10 years have dipped slightly, Temasek managed to rebound strongly last year and returned around 13% to shareholders.

On its website, the investment firm underlines four investing principals that govern its investment decisions. In this article, I dive into what these entail and how we, as individual investors, can make use of these exact same principals to find stock market winners.

Transforming economies

Emerging markets that are transforming and urbanising provide investors with a great opportunity. These economies are usually growing at a much faster rate than their more mature counterparts.

In the last decade, Temasek has focused its investments in economies such as China, India, South East Asia and Latin America. The speed of urbanisation and the growth of the middle-class population are catalysts for the growth of the nations’ gross domestic product. Companies that operate in these countries may be able to prosper as a result.

Temasek mentioned on its website that it invests in sectors such as financial services, infrastructure, and logistics. These sectors play a more significant role as countries mature and develop.

Growing middle-income population

Population wealth is vital to economies. Countries that see a growing middle-income population will enjoy increased consumer expenditure as a result. Businesses that can capitalise on this will consequently reap the rewards as well.

Temasek leverages on this growing consumer demand by investing in telecommunications, media and technology, consumer and real estate.

Deepening comparative advantages

Comparative advantages can be as simple as having built up a solid brand reputation or having in-house technologies or patents that can set companies apart from their competitors.

Emerging champions

Temasek believes in investing in companies that have a “strong home base” and companies at “inflection points”. This means the companies have a strong fundamental support and can use that base to grow regionally or globally.

The Foolish bottom line

Temasek employs a wide strategy to achieve their impressive investment returns. They not only look at industries as a whole but also focus on the fundamentals of the individual companies.

Individual investors can also make use of these investment principals to find investments in the stock market.

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